The Trouble with Loan Agreements: Conflicting UK and South American Perspectives

This article examines the tricky integrity of competition issues associated with loan players playing against their parent club. After discussion between both co-authors it became apparent that a variety of national associations have divergent approaches to the same issue. With Premier League (PL), Football League (FL) and Argentinean football regulatory approaches examined, this article aims to draw out the difficult policy questions to resolve regarding conflicts of interest and competitive balance within a league.

A Premier League and Football League Perspective

The PL regulations state that a PL player cannot play against his parent club and that if the loan agreement becomes a permanent transfer, the selling club can insist that the player cannot play against it for the remainder of the season[1].

The FL regulations appear to give slightly more leeway by prohibiting a loanee playing against his parent club unless expressly permitted by the parent club[2]. This option is not available for PL clubs. Recently, Arsene Wenger expressed his dissatisfaction with the current system in the PL:

“Once you are on loan, it should be a transfer – you play for the club. You cannot play for the club only in 19 games and not against another club.When I arrived you could decide that when you loan the player he could play against you or not”.

“We had the case with (Jermaine) Pennant as well when he went to Leeds. I allowed him to play against us because at that time you could decide. Now, they have decided that you don’t have the right, which is a little bit questioning the integrity of the players.”

Wenger also took the example of Romelu Lukaku who could not face Chelsea. This gave Arsenal’s rival a perceived advantage as he could not play against his parent club but could play against everyone else. Wenger effectively made the argument for a lessening of competitive balance if top performing loan players are protected from playing (and harming) their parent club.

The difficult balancing act faced especially by the PL is whether to allow more flexibility in the rule which could lead to footballing integrity issues. The main problem advanced, (which is the same for third party football player investment (TPI)) is that there is an inherent conflict of interest if the player’s parent club puts pressure on the player to play badly (“if you want to have a future with us I suggest you have a very average game”), gives away a penalty or gets sent off etc. The prohibition stops even the perception of potential wrongdoing. For the regulators, and especially the PL after dealing with TPI issues, many fans would no doubt tolerate such a restriction.

Whilst the rationale for why a loanee player should not play against his parent club is relatively clear, PL rule V.7.3 regarding a prohibition on a player who has his loan agreement turned into a permanent deal is much less straightforward. There seem to be fewer integrity issues in relation to such a prohibition and appears to provide an advantage to a selling club, protecting their team against a permanently transferred player. This interesting conundrum that is examined later on is whether such a prohibition may actually breach Article 18bis of the FIFA regulations.

Argentina

The practice of banning a loaned player from playing against his parent club was until relatively recently an accepted practice in Argentina. This was not derived from any regulation but by clubs agreeing on the ban during the negotiation of the loan agreement ( labeled by some as “the fear clause”). In the last decade however, the players union started to complain against such clauses as being contrary to a player’s rights.

The previous collective bargaining agreement and the national regulations were silent on the matter, so clubs continued the use of the clause and the players union continued to attack it. At one point clubs started to ignore the agreed contractual clauses by either fielding the player, or fielding him and then refusing to pay any additional amount stipulated if he played, arguing that the clause was not legally enforceable. In 2009, a collective bargaining agreement for professional football players included a specific clause voiding the “fear clause”. This meant loanee players could play against their parent club.

Specifically Article 8.8 provides that in the case of a temporary transfer, any clause that impedes the football player, professional or amateur, to play against his parent club will be deemed null and void and without any effect. This new provision has limited the practice but has not totally eliminated it. It is understood that a “gentlemen’s agreement” still exists between clubs to apply the “fear clause” even if it is not explicitly written down in a contract.

There is also a debate in relation to the validity or invalidity of a clause imposing an additional amount to the loan price (rather than a ban) for fielding the player. While in principle there is nothing wrong in establishing additional amounts in case of fulfillment by the player of certain objectives, if the amount is disproportionate it could be seen as an indirect way to prevent the player from playing against his parent club. Another problem with these additional sums (and the confirmation of the club’s intention) is that clubs usually refer to them in the contract as “penalties” or “fines” for fielding the player.

By way of policy considerations, in Argentina there was never a debate in relation to the integrity of the player. For many the party more concerned with such a prohibition is the parent club. One prime example of this is Fernando Morientes who in 2004 was loaned to Monaco. Monaco played Madrid in the Champions League and it was Morientes’ goal that knocked Madrid out. Just as in the Morientes example, it may even be that the parent club fears the loaned player will give his best in that specific game to prove the parent wrong in originally loaning him.

FIFA

Whilst there are conflicting approaches of various leagues to loan players playing against their parent club, it is interesting to see whether either or both approaches impact on FIFA Article 18bis. Article 18bis is binding at national level and is included in, for example, the English Football Association’s regulations. It states:

“Third-party influence on clubs.

1. No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.”

A clause limiting the ability of a team to field a player in a specific match because he “belongs” to the parent club would appear to be a clause which enables a third party (parent club) to acquire the ability to influence in employment-related matters its independence of the club were the player is on loan.

The rationale behind drafting Article 18bis was originally to prevent investors or third parties who are outsiders to the “football family” having such influence on a club. Nonetheless, the wording of the clause has been drafted widely to potentially cover other situations which may arise. There can be little doubt that another party has a major influence over performance of another team by not allowing him to play. Prohibiting the practice thus ensuring the parent club cannot have an even bigger influence on the player by, for example, instructing him to “go easy” in the game is the converse perspective.

In conclusion, it is instructive to see the different approaches taken by the UK and Argentinean football authorities in this specific area. Whilst the PL and FL perceive the integrity issues as important to justify more stringent control, the football regulators in Argentina are comfortable to permit such a practice.

[1] V.7.2. during the period of the Temporary Transfer of his contract registration a Player shall not play against the Transferor Club;

V.7.3. if during the period of a Temporary Transfer the Player’s registration is transferred permanently from the Transferor Club to the Transferee Club, the two Clubs may agree in writing (to be copied to the League) that the Player shall not play against the Transferor Club for the remainder of the Season;

[2] 52.5 During the period of any temporary loan transfer, a Player shall not play against his Parent Club… without the prior written permission of the Parent Club.”

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